Millicom International Cellular S.A. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Acceleration: Executed 3 major milestones: acquisition of Telefónica's Uruguay operations, definitive agreement for Telefónica Ecuador, and partial closing of infrastructure transaction with SBA. Unlocked over $500 million in proceeds, declared a special interim dividend of $2.5 per share. Rang the NASDAQ opening bell in June.
• Financial Performance: Added nearly 250,000 net postpaid customers; Home gained 41,000 customers. Adjusted EBITDA reached a new high of 46.7%, up 3.2 points year-over-year. Equity free cash flow was $218 million in Q2, with H1 total at $395 million. Leverage dropped to 2.18x.
• Country Performance:
  • Colombia: Service revenue accelerated to ~5% year-over-year organic, mobile postpaid customer base grew 15%, Home up 12%, adjusted EBITDA margin 39.5%.
  • Guatemala: Postpaid customer base up 20% year-over-year, mobile service revenue up >5% in real terms, operating cash flow reached a record $191 million.
  • Panama: Adjusted EBITDA margin hit a new record of 51.7%, mobile postpaid customer base up 20% year-over-year, mobile service revenue up 4%.
• M&A Update: Closed sale of Lati Paraguay, partial closing of SBA Tower deal. Awaiting regulatory approval for Costa Rica; signed agreements for Uruguay and Ecuador; Coltel acquisition on track for Q1 '26 closing.

Segment Performance

• Mobile Business: Grew mid-single digit this quarter. Prepaid fast-tracked due to higher ARPU, postpaid saw 14% growth in base, reaching nearly 9 million customers. Adjusted EBITDA contributed significantly.
• Home Business: Gained 41,000 customers, nearly 4x more than Q2 last year. Broadband up ~8%, Pay TV flat, fixed telephony in decline. Service revenue was slightly negative at -1.4%, an improvement from -6.1% last year.
• B2B Business: Service revenue grew nearly 4% organically. Digital services had a 16% CAGR over 2 years, mobile B2B up 13% year-over-year. SME base expanded 6% year-over-year.

Guidance

• Aim to deliver $750 million in equity free cash flow for the year.
• Year-end leverage target is below 2.5x, excluding impact of strategic M&A projects but still expected to be below 2.5x at year-end.
• Board approved an interim dividend of $2.5 per share, paid in 2 installments.

Risks

• Adverse foreign exchange impact on service revenue.
• Competitive environment in some markets affecting margins and growth.
• Uncertainties with regulatory approvals for M&A projects.

Question and Answer

Q: About Guatemala's improvement and competitive environment A: Discussed prepaid to postpaid migrations, low postpaid penetration in Guatemala (only 12% penetration), building 350 new sites, and competitive pressure in some market sites Q: On CapEx outlook A: CapEx expected between $650 million - $700 million this year and similar in following years, around 11%-12% of revenues Q: Drivers of accelerating service revenue growth A: Migration from prepaid to postpaid (20% postpaid penetration vs. total mobile customer base), price increases, convergence (25% of new sales are convergent), and B2B growth Q: Cost control and restructuring costs A: Most big-ticket cost control initiatives completed last year; minor restructuring costs in Q2, no major redundancy plans expected Q: Leverage target and refinancing A: Leverage target includes dividends and M&A, working on raising local currency debt in countries to manage debt, planning refinancing for upcoming bond maturities Q: Colombia's competitive landscape and Coltel acquisition A: WOM's aggressive low-cost mobile plans seen as tactical; Coltel acquisition process ongoing with regulatory steps including listing of shares and phases of privatization law in Colombia Q: 5G rollout impact on CapEx A: 5G investment based on device penetration, granular investment in urban areas where device demand is higher Q: Acquisitions pipeline A: Focus on announced M&A (Uruguay, Ecuador, Coltel), adding diversity to portfolio, not prioritizing large acquisitions like Mexico at this stage